Music Industry Turns to Napster Creator for Help

By JEFF LEEDS

Published: December 3, 2004

As a teenager, Shawn Fanning brought free music to the masses, creating the Napster file-swapping program and unleashing a technological genie that granted the wishes of fans seeking virtually any song at any time -- gratis. Now, the recording industry is turning to the college dropout turned cult hero, with dreams of putting the genie back in its bottle.

The major record corporations, who accused Mr. Fanning's Napster of ravaging CD sales and weakening the underpinnings of the industry, now say that a licensed file-sharing system could bolster their position in their legal fight against piracy as well as increase digital music sales.

Mr. Fanning, now 24 and part of a new venture called Snocap, has lately written software that would recognize songs being made available on a peer-to-peer network and let copyright holders set terms for its price and its use by consumers who wish to download them.

Snocap and the music corporations are envisioning an online community where visitors could trade songs without violating copyright laws.

Mr. Fanning's San Francisco-based venture has attracted support from the industry's heavyweights. Vivendi Universal, the record conglomerate, has struck a deal to let Mr. Fanning's company add the music corporation's online catalog of songs to Snocap's database.

But if the industry has managed to set aside any differences it had with Mr. Fanning, it still faces troublesome questions.

Foremost among them is that for the plan to work, a peer-to-peer network still must decide to adopt Snocap's technology. And then, as it reduces the amount of free music available, the network must find a way to attract paying music fans.

''If what they're looking for is free, then they're not likely to participate,'' said Josh Bernoff, an analyst with Forrester Research. ''There's going to have to be some sort of uniqueness to a system like this that goes beyond it being a peer-to-peer system.''

The existing networks have attracted millions of fans hungry for free music and movies, and their parent companies have generated revenue by showering users with advertisements. Snocap executives, who declined to comment for this article, argue that the network operators are, in the end, entrepreneurs who will be persuaded that changing to a Snocap-driven business is a wiser path to profit.

For the moment, however, there appears little chance that the most popular file-sharing networks, like Kazaa, will embrace the software, which means the industry may have to rely on an upstart network with few customers. One network in development, Mashboxx, has been in discussions to plug Snocap's software into its system, according to people in the music industry involved in the talks.

But even if licensed file-sharing fails commercially, music executives are privately delighting in the public-relations value of working with their onetime legal nemesis.

''We sort of liked the irony of the whole thing,'' said one executive, recalling an early meeting with Mr. Fanning, who declined to comment for this article.

Perhaps more important, the rollout of Snocap may figure in the industry's bid to reverse a series of losses in court, where the major labels have been seeking verdicts to hold the companies behind the Grokster and Morpheus networks liable for copyright violations.

The networks have long argued -- and a federal appeals court has agreed -- that they cannot monitor their users. But the music companies may argue that Snocap proves that it is possible to track and block the transmission of unauthorized content.

''I just view this as an exercise in R.I.A.A. propaganda,'' said Fred Von Lohmann, a lawyer at the Electronic Frontier Foundation, referring to the Recording Industry Association of America. Mr. Von Lohmann represents StreamCast Networks, the company that releases Morpheus software. ''If you care about copyright,'' he added, ''why would you want to drive people to more offshore, encrypted, anonymous kinds of networks? That's all this would accomplish.''

There is no dearth of examples of how technological shifts have left the recording industry unsure of where to turn. In 1998, the major music corporations sued (unsuccessfully) to block the release of Diamond Multimedia's portable MP3 player, saying it ''promotes the illicit use'' of digital music files.

Six years later, the industry is gleefully promoting Apple Computer's iPods, even placing them in music videos. The rock band U2, in a deal brokered by its record label, endorsed a line of iPods.

The industry's turnabout with Mr. Fanning is not much different. Months after Napster Inc., which he helped found, emerged in 1999, the major labels sued it for copyright infringement.

Napster tried to filter out some unauthorized songs using an acoustic ''fingerprinting'' technology not unlike the sort that Snocap relies on -- a technique that tracks the sonic characteristics of music files.

But a judge's ruling forced the network out of service in mid-2001. Mr. Fanning became a consultant for Roxio, which bought Napster's famous name at a bankruptcy auction and transformed it into a subscription music service.

When Mr. Fanning began making the rounds of the major labels to talk up his newest creation in the middle of last year, he was greeted with skepticism in some quarters. But several executives said the lasting power of Mr. Fanning's original file-sharing concepts intrigued them enough to listen to his latest idea.

''This is a world of very short memories,'' one music executive said. ''If you held grudges you wouldn't last two minutes in this industry.''

Mr. Fanning ''was popularly thought of as a dragon slayer, when in reality that wasn't his intention'' with Napster, said Larry Kenswil, president of Universal Music's eLabs division. ''He's taken that experience, taken a step back and thought of a way that everyone can benefit.''

Mr. Fanning also had the advantage of coming in with better connections than the ones he had as a Northeastern University dropout surrounded by Silicon Valley venture capitalists in the dot-com boom. Snocap has been receiving advice from Hilary Rosen, the longtime chief executive of the R.I.A.A. who is a political commentator and strategist.

Said David Munns, vice chairman of the music giant EMI Group, ''It's never too late to go straight.''

Photo: Shawn Fanning's new venture, which is called Snocap, has attracted the support of Vivendi Universal. (Photo by John G. Mabanglo/Agence France-Presse -- Getty Images)